I think people expecting a big jump in image quality from Sony and Microsoft are going to be disappointed ...
First off, neither Sony or Microsoft are going to be willing (or in Sony's case able) to take the same kind of losses with their next systems that they took with the PS3 and XBox 360. I could be wrong but I suspect that both Sony and Microsoft are going to have losses that are in the $50 to $100 range (or lower) rather than the $150 to $200+ that they had in the previous generation.
Secondly, I think both Sony and Microsoft will be looking to enhance gameplay using a new user-interface/controller (something like Kinect or a touch-screen controller), which will likely add $50 to $100 to the manufacturing cost of the system.
Finally, they will want to keep the price of the system to consumers at a reasonable level ($400) to encourage people to buy it.
When you add these three things together, compared to the XBox 360 at launch their next system has to have a $200+ reduction in manufacturing cost, and the next Playstation has to have a $400+ reduction in manufacturing cost compared to the PS3, which will translate into a very large step back in how advanced these systems are.
If the XBox 360 or PS3 were launched with similar constraints I would expect that they would have had about 1/4 or 1/2 their current processing power. At 480p these systems would be able to maintain the improvements people associate with these consoles, but at HD resolutions the visual improvement would be far more modest. In a similar fashion, at 720p the PS4 and "XBox 720" will likely have many visual improvements but will not be able to improve visuals signficiantly while rendering at 1080p@60fps
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